New Standard Energy Completes Drilling Operations on its First Eagle Ford Wells

Magnum Hunter Resources Eagle Ford Acreage Map
Magnum Hunter Resources Eagle Ford Acreage Map

Australia-based New Standard Energy completed drilling operations on its second Eagle Ford well (Peeler Ranch 6-H) in late March 2014. The first well (Peeler Ranch-5H) was completed at the end of February 2014. New Standard entered the Eagle Ford in December 2013 when the company acquired Magnum Hunter Resources' Eagle Ford assets in Atascosa County, TX.

The wells are operated on the company's behalf by Magnum Hunter. New Standard has a 98.4375 % working interest and a 72.4125 % net royalty interest in the two wells.

Read more: Magnum Hunter Signs Option to Sell Pearsall and Eagle Ford Assets

Magnum Hunter is a New Standard shareholder, and the companies have formed a strategic business partnership in the play. As drilling continues, New Standard will work with Magnum Hunter to identify drilling locations.

We have had an excellent start to our Eagle Ford drilling campaign and look forward to continuing to work alongside the team at Magnum Hunter to deliver more wells within budget and on time to facilitate increased production and revenue.
— New Standard Energy Managing Director Phil Thick

Both New Standard Eagle Ford wells were drilled in parallel lateral lengths, targeting the same hydrocarbon bearing zone in the formation. The wells will be fracked in April 2014, using the "zipper frac" method, which alternates frac stages between the two wells. According to company officials, production will begin in late April or early May. The two wells will add to the five existing wells already in production within the acreage.


Magnum Hunter Signs Option To Sell Pearsall & Eagle Ford Assets ~$25 Million

Magnum Hunter Resources Acreage Map
Magnum Hunter Resources Acreage Map

Magnum Hunter (MHR) has granted New Standard Energy, an Australian company, the option to acquire Pearsall Shale and Eagle Ford Shale assets in Atascosa County.

New Standard paid $75,000 for the option and will pay an additional $15 million in cash and $9.5 million in equity.

In total, Magnum Hunter will receive a little less than $25 million for ~5,200 net acres and 300 boe/d of production from five wells. New Standard has until January 21, 2014, to exercise the option.

Read more:Penn Virginia - Magnum Hunter Reach Eagle Ford Deal Worth $400 Million

The deal is part of ~$700 million in divestitures that will allow the company to focus on development of assets in the Marcellus and Utica shales.

Our ability to grow both production and reserves at the highest internal rate of return within our existing asset base, undoubtedly lies in our acreage position located in the Utica and Marcellus Shale resource plays.
— Mr. Gary C. Evans, CEO

Also read:Magnum Hunter Completes PVA Deal - Still Targeting the Eagle Ford and Pearsall

Magnum Hunter plans to spend $400 million in 2014, with $260 million allocated in the Utica and Marcellus, $50 million planned in the Bakken, and $90 million spent on midstream infrastructure.

If the option is exercised by New Standard Energy, this deal likely ends Magnum Hunters upstream activity in the Eagle Ford and Pearsall completely.


Magnum Hunter Resources Completes Sale To PVA - Still Targeting Eagle Ford & Pearsall

Magnum Hunter Resources Acreage Map
Magnum Hunter Resources Acreage Map

Magnum Hunter Resources (MHR) completed the sale of 19,000 net acres in the Eagle Ford to Penn Virginia for approximately $400 million in the second quarter. The deal was for the majority of the company's Eagle Ford holdings.

Magnum Hunter retained approximately 7,000 net acres prospective for the Eagle Ford and Pearsall Shale formations in Atascosa, Fayette, and Lee counties. Two wells were completed and the company plans to explore and develop its acreage further.

MHR drilled one operated Eagle Ford well and participated in one non-operated Pearsall well during the quarter:

  • Peeler Ranch #4H - is operated by MHR and was drilled to a total measured depth of 15,206 feet (horizontal lateral length of 5,714 feet) and is currently waiting to be completed. Magnum Hunter owns a 98.4% working interest in the well and is the operator.
  • McCarty Unit A 1H is operated by Marathon Oil and was drilled to a measured depth of 17,438 feet (horizontal lateral length of 6,368 feet), fraced with 17 stages in the Pearsall Shale. The well produced 584 boepd on an 18/64th adjustable choke with 2,185 psi FTP. Magnum Hunter owns a 31% working interest in the well.

H.C. "Kip" Ferguson, President, commented, "This combo Pearsall/Eagle Ford area has always been of interest to our team. The right depth, gas-to-oil ratio, and completion style will be required to optimize the potential for these formations. The Pearsall Shale is different in composition to the Eagle Ford Shale. It is composed of more silica with interbedded organic shale and limestone. We believe that our Pearsall Shale acreage is located within the wet gas to rich condensate window of the play, which is ideally located between the Charlotte fault trend eight miles to the north and the Karnes fault trend to the south. Our internal technical analysis, core samples, our McCarty Unit A 1H well, and recent third-party well results in the area, indicate potential for both Eagle Ford Shale and Pearsall Shale productivity on this Atascosa County acreage.


Penn Virginia & Magnum Hunter Eagle Ford Deal Worth $401 Million

Penn Virginia Eagle Ford Map
Penn Virginia Eagle Ford Map

Penn Virginia (PVA) has reached an agreement with Magnum Hunter Resources to acquire the company's Eagle Ford properties in Gonzales and Lavaca counties for $401 million. Magnum Hunter will retain 7,000 net acres in Atascosa, Fayette, and Lee counties.

The deal consist of approximately 40,600 gross (19,000 net) acres, with 46 gross (22.1 net) wells producing approximately 3,000 boe/d net in March of 2013. Seven wells are waiting to be completed and four wells are in some stage of drilling. Proved reserves of 12 million boe (37% PDP) were attributed to the assets at year-end 2012.

H. Baird Whitehead , President and Chief Executive Officer stated, “This is a transformational acquisition which will add significantly to our leasehold and drilling inventory in the Eagle Ford Shale play and is highly complementary to our existing operating areas where we and MHR have had very successful drilling results.

If we assume PVA paid an average of $60,000 per flowing boe/d, that accounts for $180 million of the acquisition price. That leaves $221 million for the 19,000 net acres or a little less than $12,000/acre. That's a rough estimate.

Penn Virginia now has 83,000 gross (54,000 net) contiguous acres in the area with an inventory of 640 gross (420 net) drilling locations. PVA now has 117 gross (82 net) wells producing an average of 10,900 boe/d. Drilling for the year in the Eagle Ford will now increase from 38 (28.8 net) wells to 62 (39.3 net) wells. Penn Virginia's capital budget will increase by $72-82 million as a result.

Magnum Hunter's Pearsall Shale exploration well with Marathon in Atascosa County will not be affected by the deal.

Where Are Oil & Natural Gas Prices Headed? Gary Evans of MHR

Where are natural gas prices and oil prices headed in 2013? Gary Evans discusses his view US oil & gas prices.

Notes from the interview include:

  • Need cold weather for natural gas prices to recover
  • The industry needs $4 natural gas prices
  • Technology has allowed for recent shale boom
  • China and India are thirsty for oil
  • The US is producing more than 50% of what it consumes
  • WTI to Brent spread allowed for the recent run up in oil prices
  • Not bullish on oil prices, but expects more upside to natural gas
  • Difficulty in leasing is really a federal lands issue

Do you agree or disagree? Share your thoughts in the comments below.